When attorneys search for ways to reduce their budgets during slow economic times, advertising and marketing often are the first budget cuts. Marketing representatives report that lack of a marketing budget is the most common reason that attorneys give for not participating in legal marketing. But reducing a legal advertising budget during a recession is usually a step in the wrong direction. Many successful law firms increase their marketing efforts during tough economic times, but they closely monitor return on investment (ROI).
During a recession, the typical consumer has less disposable income. This directly impacts law firms because (1) fewer clients have the ability to pay for legal services; and (2) clients are unable or unwilling to pay as much for legal services. As a result, retention rates will be lower. Because of lower retention rates, a firm needs more prospects to maintain its client base. And because clients may not be able to pay as much, or may pay at a slower rate, a firm needs more retained clients to maintain its revenue stream.
Though the impacts may differ, all types of law firms are affected by financial pressure on consumers. For instance, personal injury law firms may feel the impact because insurance adjusters offer smaller settlements or are less likely to settle cases. And family law attorneys may be affected as divorcing couples, with less equity in their homes and shrinking retirement accounts, have fewer options for paying legal fees. The financial pressure may force divorcing parties to resort to mediation or other forms of alternate dispute resolution to reduce the cost of their divorce.
If fewer clients have money to retain legal services and those who do have money take steps to reduce the amount they pay, the effect on a firm’s income should seem obvious, but reducing a law firm’s advertising budget only exacerbates the impact of the recession. A law firm needs to increase its advertising to compensate for the smaller pool of prospective clients, smaller fees and slower paying clients.
Because law firms, too, may have limited resources, they must be more efficient with their advertising budgets. One effective strategy is to sign up for as many low cost programs as possible: High cost programs limit the number of programs a firm can afford. The firm also must monitor results carefully. A firm should know how many calls, emails and office visits that a program generates as well as the retention rate and revenue from all legal marketing programs. Inexpensive marketing programs that provide detailed tracking are critical to a firm’s success during a recession.
Because a firm needs a higher volume of inquiries to generate the same revenue, the law firm should seek out legal marketing companies that generate the highest volume of inquiries and disclose the volume that the firm can expect to receive. In sum, a law firm should never reduce its marketing when facing a recession but should instead increase efficiency.
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